A nice problem to have

[Anonymous]

We (2 working parents, three teens) came into a large-ish wind fall. Not enough money to quit working but enough to pay off the house and do a once in a lifetime vacation for our family of 5. The debate is whether we should we pay off the house (with its 3% interest rate) or put it into the market (we already max out our retirement accounts). My thought is that we should pay off the mortgage as having this money around will just be too much of a temptation. My spouse thinks it’s nuts not to keep this interest rate especially with college right around the corner. Wwyd.

[Anonymous]

This is a no-brainer. You do not pay off the mortgage. That is a very middle class way of thinking.

[Anonymous]

What is your current mortgage rate?

[Anonymous]

Have you saved up for 3 kids worth of college? I'd make sure that's covered first.

While the math usually favors sticking extra money in the market, there is a certain peace of mind in knowing your house is paid off.

This usually comes down to a personal choice.

[Anonymous]

You know yourself best. If keeping that much $$ is going to tempt you into spending habits that you don't want, then paying off your mortgage is the smarter choice.

You could pay off your mortgage then set up an automatic monthly transfer of an amount just under your old mortgage payment into to an investment account. And then don't touch that account until you really need it.

[Anonymous]

We just made a similar decision (but our mortgage rate was 6.8% and not 3%). Opted to pay off the mortgage. I don't think we would have done that at 3%, but there is an amazing peace of mind in knowing that if one of us dies or can no longer work we don't have a mortgage payment anymore.

[Anonymous]

Anonymous wrote:
What is your current mortgage rate?

Learn to read

[Anonymous]

Paying off a mortgage sounds good but it's actually not.

[Anonymous]

Anonymous wrote:You know yourself best. If keeping that much $$ is going to tempt you into spending habits that you don't want, then paying off your mortgage is the smarter choice.

You could pay off your mortgage then set up an automatic monthly transfer of an amount just under your old mortgage payment into to an investment account. And then don't touch that account until you really need it.

Op here. That’s a great option - my plan would be to push the old mortgage payment into the 529s.

[Anonymous]

We don’t know enough about your finances yet. Are all three of the 529s fully funded? Meaning enough for state school - multiple in state costs times four and make sure you have enough in the 529s first. I guarantee if you have to take out ones for college, the interest rate will be more than 3%

[Anonymous]

I hate debt and would love to pay off the house. Our financial advisor has made it clear to absolutely not pay off faster than we need to. We make a lot more than when we bought it and our interest rate is crazy low. Use that money to invest.

[Anonymous]

1-3 mortgage and recast if you can, the rest in savings and college.

[Anonymous]

Anonymous wrote:Paying off a mortgage sounds good but it's actually not.

We did ours and it was great.

[Anonymous]

I would also want to spend that money- so when we get windfalls (we have a bonus-heavy income stream) we put it into a brokerage account. It forces me to think before taking money out (and paying capital gains). For us that’s because 529s are funded and we have a large cash cushion for emergencies or unexpected expenses. Our mortgage is about 3% and we don’t ever plan to pay it off. We’ll keep it till we downsize.

[Anonymous]

Keep your low rate mortgage. You’ll never be able to borrow more cheaply than 3%.

Take your nice vacation. I’d save the rest in either brokerage, MMF or, if you feel you’ll be tempted, put it in a CD or TBill that you can’t easily touch.